Colorado hospitals charge up to 10 times Medicare's rates, data show

By Michael BoothThe Denver Post

Posted:
05/08/2013 11:39:18 AM MDT

A woman in Avon works through piles of medical bills in 2004 after an on-the-job injury. (The Denver Post file)

Colorado hospital retail prices for common surgeries and treatments often vary from one another by 400 or 500 percent, and the most egregious rates are eight to 10 times what Medicare pays, according to new federal data.

The wild price fluctuations are evident across the country. Rural hospitals frequently charge much less than their urban counterparts, while a facility just miles from another will sometimes charge double what its rival bills.

Local and national health experts attacked the dramatic variations as more evidence of a systemic mess that distorts reality for consumers and hinders the quest for cost and quality progress in medicine.

Medical Center of Aurora charges $59,000 to treat pneumonia, for example, compared with $49,000 at University of Colorado Hospital and $17,000 at Arkansas Valley Regional Medical Center in La Junta. Medicare, which identified hospitals in its Wednesday release for the first time, pays only $8,000 to $11,000 for such care.

Hospital executives argue almost no one pays the retail or "chargemaster" rates — Medicare, Medicaid, military and private insurance plans negotiate steep discounts. But some of the uninsured or underinsured do see those high bills and end up in collections if they can't pay.

The new numbers "highlight a troubling trend: Those with the least ability to afford coverage end up paying the most," said George Lyford, an attorney with the Colorado Center on Law and Policy. The center argues for reforms bringing insurance to more citizens.

But the charges can affect a broader swath than that, said Phil Kalin, president of the Center for Improving Value in Health Care. Some insurers still agree to pay a set percentage of the chargemaster, so hospitals have an incentive to bump up those prices 5 or 6 percent a year.

Even though only a small number of insurers pay that way, the results can mean a few million dollars more a year in the billion-dollar hospital systems that are growing to dominate the Colorado market, Kalin said.

Federal officials said in a conference call they hoped the release would help push more transparency onto hospitals that so far have little incentive to compete for consumers.

"We hope consumers will look at this data, and we hope it will shine a much brighter light on practices that don't make sense to us," said Jonathan Blum of the U.S. Health and Human Services Department's Medicare office.

Medicare officials and many private groups highlighted more examples they say make no sense:

• For major joint replacement, Medicare allows about $13,000 to $20,000, depending on the region and some allowances for patient mix. The retail price at Sky Ridge Medical Center in Lone Tree, which is owned by the for-profit chain HCA-HealthONE, is $84,000.

Exempla St. Joseph Hospital also charges about $84,000 for that same joint replacement. By comparison, Denver Health charges about $46,000 for the procedure, and Delta County Memorial Hospital charges only $32,000 to full-paying customers.

The national average charge for that service is $50,000.

• For general chest pain treatment, Medicare pays $3,000 to $5,000. Littleton Adventist Hospital, part of the Centura system, charges $31,000, and Exempla St. Joseph, $30,000.

Denver Health charges about $13,000, and Montrose Memorial Hospital in western Colorado charges only $8,000.

Averaging the charges in the 100 diagnostic categories analyzed by Medicare, Littleton Adventist chargemaster prices are the highest at 682 percent of what Medicare allows.

In the middle range, charges at St. Anthony North Hospital — also part of Centura — were 437 percent of Medicare, and University was at 343 percent.

At the lower end, Denver Health's retail charges averaged 212 percent of the Medicare payments, and Keefe Memorial in Cheyenne Wells, which had only one procedure listed, was 68 percent.

Many hospital executives dismiss the charge information as nearly meaningless because so few consumers really pay those rates. The uninsured who see a bill with full rates often have their care written off as charity or uncollectible, they said.

Most hospitals, meanwhile, lose money on cases where they get only the Medicare allowance, said Steven Summer, president of the Colorado Hospital Association. The high retail charges, and in-between charges negotiated with insurance companies, make up the difference.

Some Colorado consumers are protected from the sky-high bills by a state law passed in 2012 limiting what hospitals can charge the uninsured. That law requires hospitals to widely advertise their charity-care policies and to charge the poorest patients only the same negotiated discount rates offered to major insurance companies.